nep-gth New Economics Papers
on Game Theory
Issue of 2014‒12‒24
twenty papers chosen by
László Á. Kóczy
Magyar Tudományos Akadémia

  1. Majorized correspondences and equilibrium existence in discontinuous games By Pavlo Prokopovych
  2. An ultimatum game with multidimensional response strategies By Werner Gueth; Maria Vittoria Levati; Chiara Nardi; Ivan Soraperra
  4. Sequences in Pairing Problems: A New Approach to Reconcile Stability with Strategy-Proofness for Elementary Matching Problems By Gudmundsson , Jens
  5. Graphs Inducing Totally Balanced and Submodular Chinese Postman Games By Hamers, H.J.M.; Josune Albizuri, M.
  6. Voting in Legislative Elections Under Plurality Rule By Hughes, Niall E
  7. Stability of networks under level-K farsightedness By HERINGS, P. Jean-Jacques; MAULEON, Ana; VANNETELBOSCH, Vincent
  8. Fairness and efficiency in a random assignment: Three impossibility results By Nesterov, Alexander S.
  9. Endogenous cartel formation: Experimental evidence By Fonseca, Miguel A.; Normann, Hans-Theo
  10. Learning faster or more precisely? Strategic experimentation in networks By Wuggenig, Mirjam
  11. Holdout threats of the union during wage bargaining. By Ahmet Ozkardas; Agnieszka Rusinowska
  12. Local and Consistent Centrality Measures in Networks By Dequiedt, Vianney; Zenou, Yves
  13. Equilibria in Second Price Auctions with Private Participation Costs By Xiaoyong Cao; Guofu Tan; Guoqiang Tian; Okan Yilankaya
  14. All Deceptions Are Not Alike: Bayesian Mechanism Design with Social Norm Against Lying By Ville Korpela
  15. Auctions with prestige motives By BOS, Olivier; TRUYTS, Tom; ,
  16. Ranking Terrorists in Networks : A Sensitivity Analysis of Al Qaeda’s 9/11 Attack By Husslage, B.G.M.; Borm, P.E.M.; Burg, T.; Hamers, H.J.M.; Lindelauf, R.
  17. On International Fisheries Agreements, Entry Deterrence and Ecological Uncertainty By Ellefsen, Hans; Kronbak, Lone Grønbæk; Ravn-Jonsen, Lars
  18. Dynamic Contracting: An Irrelevance Result By Peter Eso; Balazs Szentes
  19. The Closed Primaries versus the Top-two Primary By Pablo Amorós; M. Socorro Puy; Ricardo Martínez
  20. The axiomatic approach to the problem of sharing the revenue from bundled pricing By BERGANTINOS, Gustavo; MORENO-TERNERO, Juan; ,

  1. By: Pavlo Prokopovych (Kyiv School of Economics and Kyiv Economics Institute)
    Abstract: This paper is aimed at widening the scope of applications of majorized correspondences. A new class of majorized correspondences -- domain U-majorized correspondences -- is introduced. For them, a maximal element existence theorem is established. Then, sufficient conditions for the existence of an equilibrium in qualitative games are provided. They are used to show the existence of a pure strategy Nash equilibrium in compact quasiconcave games that are either correspondence secure or correspondence transfer continuous.
    Keywords: Majorized correspondence; Qualitative game; Better-reply secure game; Correspondence secure game; Transfer continuous game
    JEL: C65 C72
    Date: 2014–11
  2. By: Werner Gueth (Max Planck Institute of Economics); Maria Vittoria Levati (Department of Economics (University of Verona)); Chiara Nardi (Department of Economics (University of Verona)); Ivan Soraperra (Department of Economics (University of Verona))
    Keywords: Ultimatum; Social preferences; Incomplete information; Experiments
    JEL: C72 C91 D63 D74
    Date: 2014–08
  3. By: Sven Fischer (Max Planck Institute of Economics, Germany); Werner Guth (Max Planck Institute of Economics, Germany); Todd R. Kaplan (University of Exeter, Exeter, EX4 4PU, UK, and University of Haifa, Israel.); Ro'i Zultan (BGU)
    Keywords: auctions, espionage, collusion, laboratory experiments.
    JEL: C72 C91 D44
    Date: 2014
  4. By: Gudmundsson , Jens (Department of Economics, Lund University)
    Abstract: We study two-sided ("marriage") and general pairing ("roommate") problems. We introduce "sequences," lists of matchings that are repeated in order. Stable sequences are natural extensions of stable matchings; case in point, we show that a sequence of stable matchings is stable. In addition, stable sequences can provide solutions to problems for which stable matchings do not exist. In a sense, they allow us to "balance" the interest of the agents at different matchings. In this way, sequences can be superior to matchings in terms of welfare and fairness. A seminal result due to Roth (1982, Math Oper Res 7(4), 617-628) is that no strategy-proof rule always selects stable matchings. In contrast, we show that there is a weakly group sd-strategy-proof rule that selects stable sequences. We call it the Compromises and Rewards rule, CR. We find that stronger incentive properties are incompatible with much weaker stability properties and vice versa. The CR rule satisfies two fairness axioms: anonymity and side neutrality. For the general problem, the Generalized CR rule is sd-5-stable (cannot be blocked by groups of five or fewer agents), weakly sd-strategy-proof, and anonymous. In addition, the Extended All-Proposing Deferred Acceptance rule is sd-stable, anonymous, and individually rational at all times on a restricted domain. We provide a condition under which our results still hold if agents have cardinal preferences and compare sequences using "expected utility."
    Keywords: Pairing problems; Sequences; Stability; Strategy-proofness; Algorithms
    JEL: C62 D02 D60
    Date: 2014–11–24
  5. By: Hamers, H.J.M. (Tilburg University, Center For Economic Research); Josune Albizuri, M.
    Abstract: Abstract A Chinese postman (CP) game is induced by a a weighted undirected, connected graph in which the edges are identified as players and a vertex is chosen as post-office location. Granot and Granot (2012) characterized graphs that give rise to CP games that are balanced. This note completes this line of research by characterizing graphs that give rise to CP games that are submodular (totally balanced, respectively).
    Keywords: Chinese Postman games; submodularity; totally balancedness
    JEL: C71
    Date: 2013
  6. By: Hughes, Niall E (Department of Economics, University of Warwick)
    Abstract: Conventional models of single district plurality elections show that with three parties anything can happen - extreme policies can win regardless of voter preferences. I show that when when single district elections are used to fill a legislature we get back to a world where the median voter matters. An extreme policy will generally only come about if it is preferred by the median voter in a majority of districts, while the mere existence of a centrist party can lead to moderate outcomes even if the party itself wins few seats. Furthermore, I show that while standard single district elections always have misaligned voting i.e. some voters do not vote for their preferred choice, equilibria of the legislative election exist with no misaligned voting in any district. Finally, I show that when parties are impatient, a fixed rule on how legislative bargaining occurs will lead to more coalition governments, while uncertainty will favour single party governments. Key words: Strategic Voting; Legislative Elections; Duverger’s Law; Plurality Rule; Polarization; Poisson Games JEL classification: C71; C72; D71; D72; D78
    Date: 2014
  7. By: HERINGS, P. Jean-Jacques (Maastricht University); MAULEON, Ana (CEREC, Saint-Louis University, B-1000 Brussels, Belgium; Université catholique de Louvain, CORE, Belgium); VANNETELBOSCH, Vincent (Université catholique de Louvain, CORE, Belgium; CEREC, Saint-Louis University, B-1000 Brussels, Belgium)
    Abstract: We provide a tractable concept that can be used to study the influence of the degree of farsightedness on network stability. A set of networks GK is a level-K farsightedly stable set if three conditions are satisfied. First, external deviations should be deterred. Second, from any network outside of GK there is a sequence of farsighted improving paths of length smaller than or equal to K leading to some network in GK. Third, there is no proper subset of GK satisfying the first two conditions. We show that a level-K farsightedly stable set always exists and we provide a sufficient condition for the uniqueness of a level-K farsightedly stable set. There is a unique level-1 farsightedly stable set G1 consisting of all networks that belong to closed cycles. Level-K farsighted stability leads to a refinement of G1 for generic allocation rules. We then provide easy to verify conditions for a set to be level-K farsightedly stable and we consider the relationship between level-K farsighted stability and efficiency of networks. We show the tractability of the concept by applying it to a model of criminal networks.
    Keywords: farsightedness, stability, networks
    JEL: A14 C70 D20
    Date: 2014–08–19
  8. By: Nesterov, Alexander S.
    Abstract: This paper considers the problem of allocating N indivisible objects among N agents according to their preferences when transfers are not allowed, and studies the tradeoff between fairness and efficiency in the class of strategy-proof mechanisms. The main finding is that for strategy-proof mechanisms the following efficiency and fairness criteria are mutually incompatible: (1) Ex-post efficiency and envy-freeness, (2) ordinal efficiency and weak envy-freeness and (3) ordinal efficiency and equal division lower bound. Result (1) is the first impossibility result for this setting that uses ex-post efficiency; results (2) and (3) are more relevant for practical implementation than similar results in the literature. In addition, for N = 3 the paper strengthens the characterization result by Bogomolnaia and Moulin (2001): the random serial dictatorship mechanism is the unique strategy-proof, ex-post efficient mechanism that eliminates strict envy between agents with the same preferences.
    Keywords: random assignment,random serial dictatorship,strategy-proofness,ex-post efficiency,weak envy-freeness,equal division lower bound
    JEL: C78 D71 D78
    Date: 2014
  9. By: Fonseca, Miguel A.; Normann, Hans-Theo
    Abstract: In a Bertrand-oligopoly experiment, firms choose whether or not to engage in cartel-like communication and, if so, they may get fined by a cartel authority. We find that four-firm industries form cartels more often than duopolies because they gain less from a hysteresis effect after cartel disruption.
    Keywords: cartels,collusion,communication,experiments,repeated games
    JEL: C7 C9 L41
    Date: 2014
  10. By: Wuggenig, Mirjam
    Abstract: The paper analyzes a dynamic model of rational strategic learning in a network. It complements existing literature by providing a detailed picture of short-run dynamics in a game of strategic experimentation where agents are located in a social network. We show that the delay in information transmission caused by incomplete network structures may induce players to increase own experimentation efforts. As a consequence a complete network can fail to be optimal even if there are no costs for links. This means that in the design of networks there exists a trade-off between the speed of learning and accuracy.
    Keywords: Strategic Experimentation; Networks; Learning
    JEL: C73 D83 D85
    Date: 2014–12–04
  11. By: Ahmet Ozkardas (Turgut Özal Üniversitesi et Centre d'Economie de la Sorbonne); Agnieszka Rusinowska (Centre d'Economie de la Sorbonne - Paris School of Economics)
    Abstract: We investigate a wage bargaining between the union and the firm where the parties' preferences are expressed by varying discount rates and the threat of the union is to be on go-slow instead of striking. First, we describe the attitude of the union as hostile or altruuistic where a hostile union is on go-slow in every disagreement period and an altruistic union never threatens the firm and holds out in every disagreement period. Then we derive the subgame perfect equilibrium of the bargaining when the union's attitude is determined exogenously. Furthermore, we determine necessary conditions for the extreme equilibrium payoffs of both parties independently of the union's attitude and calculate the extreme payoffs for a particular case of discount rates.
    Keywords: Union, firm bargaining, varying discount rates, holdout threats, go-slow threats, subgame perfect equilibrium.
    JEL: J52 C78
    Date: 2014–09
  12. By: Dequiedt, Vianney; Zenou, Yves
    Abstract: The centrality of an agent in a network has been shown to be crucial in explaining different behaviors and outcomes. In this paper, we propose an axiomatic approach to characterize a class of centrality measures for which the centrality of an agent is recursively related to the centralities of the agents she is connected to. This includes the Katz-Bonacich and the eigenvector centrality. The core of our argument hinges on the power of the consistency axiom, which relates the properties of the measure for a given network to its properties for a reduced problem. In our case, the reduced problem only keeps track of local and parsimonious information. This is possible because all the centralities study here are local in the sense that the centrality measure of an agent only depends on her set of neighbors and their centralities. Our axiomatic characterization highlights the conceptual similarities among this class of measures.
    Keywords: axiomatic approach; centrality measures; Consistency; networks
    JEL: C70 D85
    Date: 2014–06
  13. By: Xiaoyong Cao (Department of Economics, University of International Business and Economics, Beijing); Guofu Tan (Department of Economics, University of Southern California); Guoqiang Tian (Department of Economics, Texas A&M University); Okan Yilankaya (Department of Economics, Koc University)
    Abstract: We study equilibria in second price auctions when bidders are independently and privately informed about both their values and participation costs and their joint distributions across bidders are not necessarily identical. We show that there always exists an equilibrium in this general setting with two dimensional types of ex ante heterogeneous bidders. We provide conditions under which the equilibrium is unique. Moreover, when the bidders are ex ante symmetric, we show that there is a unique symmetric equilibrium. We also identify sufficient conditions for existence of asymmetric equilibria.
    Keywords: Two-Dimensional Types, Private Participation Costs, Second Price Auctions, Existence and Uniqueness of Equilibrium.
    JEL: C62 C72 D44 D61 D82
    Date: 2014–12
  14. By: Ville Korpela (Department of Economics, University of Turku)
    Abstract: We say that a society has a weak norm against lying if, all other things being equal, agents rather lie in such a way that they do not get caught. We show that if this is the case, and it usually is, then Bayesian monotonicity is no longer a constraint in implementation and all incentive compatible social choice functions are Bayesian implementable. In contrast to the previous literature our result derives from a refinement of the standard Bayes-Nash equilibrium that does not rely on any kind of intrinsic lying aversion on which the experimental evidence is mixed. In addition, it suggests that the so called "multiple equilibrium problem" may not be that severe.
    Keywords: Deception, Implementation, Incentive compatibility, Revelation principle, Social norms and conventions
    JEL: B41 C72 D78 D82
    Date: 2014–11
  15. By: BOS, Olivier (Panthéon-Assas University, LEMMA, France); TRUYTS, Tom (CEREC, Saint-Louis University, B-1000 Brussels, Belgium; CES, KU Leuven, B-3000 Leuven, Belgium and Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium); ,
    Abstract: Social status, or prestige, is an important motive for buying art or collectibles and for participation in charity auctions. We study a symmetric private value auction with prestige motives, in which the auction outcome is used by an outside observer to infer the bidders’ types. We elicit conditions under which an essentially unique D1 equilibrium bidding function exists in four auction formats: first-price, second-price, all-pay and the English auction. We obtain a strict ranking in terms of expected revenues: the first-price and all-pay auctions are dominating the English auction but are dominated by the second-price auction. Expected revenue equivalence is restored asymptotically for the number of bidders going to infinity.
    Keywords: costly signaling, D1 criterion, social status, art auctions, charity auctions
    JEL: D44 D82
    Date: 2014–08–19
  16. By: Husslage, B.G.M. (Tilburg University, Center For Economic Research); Borm, P.E.M. (Tilburg University, Center For Economic Research); Burg, T.; Hamers, H.J.M. (Tilburg University, Center For Economic Research); Lindelauf, R. (Tilburg University, Center For Economic Research)
    Abstract: All over the world intelligence services are collecting data concerning possible terrorist threats. This information is usually transformed into network structures in which the nodes represent the individuals in the data set and the links possible connections between these individuals. Unfortunately, it is nearly impossible to keep track of all individuals in the resulting complex network. Therefore, Lindelauf et al. (2013) introduced a methodology that ranks terrorists in a network. The rankings that result from this methodology can be used as a decision support system to efficiently allocate the scarce surveillance means of intelligence agencies. Moreover, usage of these rankings can improve the quality of surveillance which can in turn lead to prevention of attacks or destabilization of the networks under surveillance. The methodology introduced by Lindelauf et al. (2013) is based on a game theoretic centrality measure, which is innovative in the sense that it takes into account not only the structure of the network but also individual and coalitional characteristics of the members of the network. In this paper we elaborate on this methodology by introducing a new game theoretic centrality measure that better takes into account the operational strength of connected subnetworks. Moreover, we perform a sensitivity analysis on the rankings derived from this new centrality measure for the case of Al Qaeda’s 9/11 attack. In this sensitivity analysis we consider firstly the possible additional information available about members of the network, secondly, variations in relational strength and, finally, the absence or presence of a small percentage of links in the network. We also introduce a case specific method to compare the different rankings that result from the sensitivity analysis and show that the new centrality measure is robust to small changes in the data.
    Keywords: terrorism; Network Analysis; Centrality measures; Cooperative game theory
    JEL: C71
    Date: 2014
  17. By: Ellefsen, Hans (University of Faroe Islands); Kronbak, Lone Grønbæk (Department of Business and Economics); Ravn-Jonsen, Lars (Department of Environmental and Business Economics)
    Abstract: From a game theoretical perspective, a prerequisite for an international fishery agreement (IFA) to be stable is that parties expect their benefits from joining the agreement to exceed the benefits from free riding on the agreement, and parties only comply with the agreement as long as this is true. The agreement, therefore, implicitly builds on an expectation of the ecological integrity of the natural resource. Typically, the game theoretical models assume that all parties have the same (often perfect) information of the resource and that the exploitation is an equilibrium use of the stock. As stated by experts in natural science, the fish ecology still has many open questions, e.g. how to predict population dynamics, migration patterns, food availability, etc. In some cases, parties disagree about the state, abundance, and migration of a stock, which can significantly disturb the possibilities of reaching an agreement for exploitation of the stock. This paper develops a model and applies it to the North-East Atlantic mackerel fishery, in order to analyze IFA under different ecological scenarios, and also combines the model with the economic theory of entry deterrence. The model is empirically used to determine whether the original parties to the agreement have an advantage in that the results from fishing the stock down to a smaller size prevents another party from entering into the fishery. The paper presents a novel method for illustrating the obstacles that have made an agreement for the North-East Atlantic mackerel so difficult to achieve.
    Keywords: Cooperative game; Nash game; Entry deterrence; Stability of sharing rule; Bio-economic modeling; Ecological uncertainty
    JEL: C62 C71 D74 Q22
    Date: 2014–12–01
  18. By: Peter Eso (University of Oxford); Balazs Szentes (London School of Economics)
    Abstract: This paper considers a general, dynamic contracting problem with adverse selection and moral hazard, in which the agent's type stochastically evolves over time. The agent's final payoff depends on the entire history of private and public information, contractible decisions and the agent's hidden actions, and it is linear in the transfer between her and the principal. We transform the model into an equivalent one where the agent's subsequent information is independent in each period. Our main result is that for any fixed decision-action rule implemented by a mechanism, the maximal expected revenue that the principal can obtain is the same as if the principal could observe the agent's orthogonalized types after the initial period. In this sense, the dynamic nature of the relationship is irrelevant: the agent only receives information rents for her initial private information. We also show that any monotonic decision-action rule can be implemented in a Markov environment satisfying certain regularity conditions.
    Date: 2014
  19. By: Pablo Amorós (Department of Economic Theory, Universidad de M‡laga); M. Socorro Puy (Department of Economic Theory, Universidad de M‡laga); Ricardo Martínez (Department of Economics, Universidad Carlos III de Madrid)
    Abstract: The top-two primary is the new primary system passed in several states of the US that creates a single ballot in which the top two vote getters pass to the general election. Primary elections induce a sequential game with three stages: the candidate-entry stage, the primary election stage, and the general election. We analyze the electoral winner in equilibrium of the top-two primaries versus the traditional closed party primaries in terms of the Condorcet Consistency criterion, when voters and candidates are strategic. We show that up to four potential candidates (with no more than two democrats and no more than two republicans), the top-two system generally elects the median voter?s most preferred candidate. On the contrary, with the closed party primaries, extreme candidates can be elected even when the median voter prefers the moderated counterpart. When there are more potential candidates, the closed primaries system does not show, in general, any other di¤erent deviation. The top-two system then shows every type of deviation from the Condorcet Consistency criterion: it can elect an extreme candidate when the median voter prefers the moderated counterpart, or it can elect a democratic candidate when the median voter?s most preferred candidate is republican (or the other way around).
    Keywords: Closed primaries; Open primaries; Top-two primary; Citizen-candidate; Strategic Voting; Sequential voting. Condorcet consistency
    JEL: C72 D72
    Date: 2014–11
  20. By: BERGANTINOS, Gustavo (Universidad de Vigo, Spain); MORENO-TERNERO, Juan (Universidad Pablo de Olavide, Spain; Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium); ,
    Abstract: We explore in this paper the axiomatic approach to the problem of sharing the revenue from bundled pricing. We formalize two models for this problem on the grounds of two different informational bases. In both models, we provide axiomatic rationale for natural rules to solve the problem. We, nonetheless, obtain drastic differences under each scenario, which highlights the importance of setting the appropriate informational basis of the problem.
    Keywords: resource allocation, bundled pricing, museum passes, proportional, axioms
    JEL: D63 C71
    Date: 2014–08–19

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